Pittsburgh regional M&A update - Fourth quarter, 2015

Economic and market data

Unemployment in the Pittsburgh region was estimated at 4.6 percent for the third quarter 2015, below the national rate of 5.0 percent. The Pittsburgh region unemployment rate had decreased 1.0 percent from 5.6 percent in the fourth quarter of 2014.1

Fourth quarter 2015 experienced positive financial results, as the S&P, DJIA, and NASDAQ closed up 6.5 percent, 7.0 percent, and 8.4 percent, respectively for the quarter. General market sentiment for the fourth quarter was driven by positive momentum in the US labor markets as unemployment claims data trended down for the period. Additionally, the U.S. Federal Reserve Bank indicated that their data suggested that market conditions had improved to a point where they would reduce their landmark monetary easing policies. Obviously, January 2016 has been a different story.

M&A activity

There were 59 reported M&A transactions during Q4-2015. Activity increased from 53 transactions during Q3-2015. Q4-2015 also marked an increase from 52 deals for the same period in 2014.

The aggregate deal value of the M&A transactions with reported values was $1.3 billion during Q4-2015. This is a decrease from the total deal value of $58.7 billion in Q3-2015, which was largely driven by $55.0 billion merger between H.J. Heinz and Kraft Food Group, Inc.

Pittsburgh regional market M&A activity: Aggregate transaction size and number of deals

Source: Capital IQ and Baker Tilly Capital research, Dec. 2015.

The Consumer and Information Technology sectors led the Pittsburgh Regional M&A activity each with 20.3 percent of the total deals that closed in Q4- 2015. Industrials was a close third with 18.6 percent. The Financial, Energy, Healthcare, Materials, and Utilities sectors accounted for the remainder of the transactions representing 15.3 percent, 8.5 percent, 6.8 percent, 5.1 percent, and 5.1 percent, respectively.

The aggregate deal value of the middle-market transactions with reported values was $1.0 billion during Q4-2015. This is an increase from the total deal value of $651.8 million during Q3-2015 and an increase from $371.1 million during Q4-2014.

Pittsburgh regional middle-market M&A activity

Source: Capital IQ and Baker Tilly Capital research, Dec. 2015.
Middle-market defined as transaction values between $5 million and $250 million.

The average transaction size of $84.1 million for the twelve deals with reported values in Q4-2015 was a $2.6 million increase from the average transaction size of the eight deals with reported values in Q3-2015.

Pittsburgh regional middle-market average transaction size

Source: Capital IQ and Baker Tilly Capital research, Dec. 2015.
Middle-market defined as transaction values between $5 million and $250 million.

Buyers and targets by location

As presented below, the largest number of buyers and seller were located in the Pittsburgh area during the fourth quarter of 2015.

Buyer by location

Target by location

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1BLS.gov - weighted average of the Erie, Johnstown, and Pittsburgh unemployment rates.

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